Caymans’ master funds will now have to register with authority

Opalesque Industry Update - Following several months of consultation with industry and the Cayman Islands Monetary Authority (CIMA), the Mutual Funds (Amendment) Bill 2011 was passed by the legislature on 5 December 2011, according to the international law firm Walkers. This comes after the Cayman Islands’ Premier announced in June this year a proposal to require new and existing master funds in open-ended master/feeder structures to register with CIMA to bring the Cayman regime in line with the practice adopted in other jurisdictions.

In a budget speech, Prime Minister McKeeva Bush then also told members of Cayman's Legislative Assembly of a new taxation system for certain registered master fund of hedge funds, that his government would introduce only one revenue measure for this fiscal year, "which will be on the hedge fund industry - and no external borrowing." (see Opalesque Exclusive).

The Amendment still needs to be approved by the Governor and published in the Gazette before being enacted – and this should happen before year-end.

New master funds affected by the Amendment will become subject to its registration requirements before the end of December 2011, says Walkers, and existing master funds will have a period of 90 days to comply (with a possibility for a short extension).

“Not all master funds established in Cayman will fall within the ambit of the Amendment. In essence, it will only capture Cayman master funds which (a) issue equity interests redeemable at the option of the investor(s), (b) have more than one investor and (c) have themselves one or more feeder funds which are, in turn, registered with CIMA,” says the report.

Registered master funds will have to comply with many of the duties that CIMA-registered hedge funds are subject to, namely (1) payment of an annual fee (here to be set at CI$2,500 (US$3,048)) and (2) filing of audited financial statements. B. Gravrand